CONFIDENTIAL
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6. We are sympathetic to the difficulties in which the Hong Kong
These are Government finds itself with the local banking system.
in substantial part the result of the Government's reluctance to
centralise foreign exchange reserves and itself absorb exchange risks (and obtain the offsetting benefits of high interest rates
on sterling). But we cannot contemplate special concessions to
Hong Kong to relieve them of the burden of a guarantee arrangement
to which we are not a party. We cannot say more than that these
arrangements are a matter for the Hong Kong Government, and that
we cannot treat Hong Kong differently from other official sterling
holders with whom we have concluded Agreements.
Q.
A.
Q
WHAT HAS BEEN THE OUTCOME OF THE RECENT CONSULTATIONS?
"There has been a useful exchange of views. The Agreements
continue in force until September 1973."
WHAT ARRANGEMENTS HAVE BEEN MADE FOR IMPLEMENTATION
DURING FLOATING?"!
A.
•
"That is a confidential matter between HMG and the other
signatories."
WHAT ARRANGEMENTS HAVE BEEN MADE FOR COMPENSATION FOR THE
A.
LOSS OF VALUE OF STERLING HOLDINGS?
"That is a matter for my Rt Hon Friend, The Chancellor of the
Exchequer."
CONFIDENTIAL
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